Over the near term, YTL Power’s earnings will be driven by the improved profitability of PowerSeraya, while a planned RM15b YTL Green Data Center Park in Johor will broaden its earnings base over the longer term. Kenanga said it maintains its forecasts with the target price of RM1.09 and OUTPERFORM call.
During an engagement with the group, Kenanga took away some key points about the group, the annualised FY23 EBITDA/MWh for PowerSeraya of SGD45 matches the rates during the pre-LNG terminal period of SGD48 in FY11, SGD43 in FY12 and SGD42 in FY13 (FYE Jun). Recall, the commencement of the Singapore LNG terminal in May 2013 which triggered the “take or pay” LNG supply agreement partly caused PowerSeraya’s EBITDA/MWh to decline from SGD36 in FY14 to as low as SGD7 in FY19. However, these agreements have ended between 2020 and 2023, resulting in an improvement in PowerSeraya’s EBITDA/MWh to SGD23 in FY21 and SGD27 in FY22, and further in FY23 (see charts on Page 2).
Apart from higher EBITDA/MWh, PowerSeraya’s earnings could also be driven by improved efficiency arising from better
economies of scale backed by a larger market share (i.e., to return to >25% during the pre-LNG terminal period from 18% currently).
The newly acquired 396MW Tuaspring (completed in Jun 2022) reported quarterly PBT of c.RM100m each in 1QFY23 and
2QFY23. Recall, its power generation business in Singapore reported a PBT of RM591.4m in 1HFY23, which already surpassed the RM420.7b achieved for FY22. We have forecasted PBT of RM1.07b and RM1.20b in FY23 and FY24, respectively, for the Singapore IPP assets.
Separately, YTL Power is also building an RM15b solar-powered data centre campus called YTL Green Data Center Park in Johor with a total capacity of 500MW by 2030. The RM1.5b Phase 1 with a capacity of 72MW is expected to come online by 1QCY24. Already, Sea Ltd has agreed to take up 48MW of Phase 1.
The project financing has been put in place comprising RM1.1b Islamic term-financing arranged by Maybank and OCBC Bank and the estimated project IRR is in the low-teens. The house said it understands that there is upside potential to the project IRR for subsequent phases but for a start, the strategy is to first rope in big names such as Sea Ltd.
Meanwhile, 168MW capacity in the same data centre campus comprising eight individual data centre facilities will be codeveloped with GDS Holdings, a leading developer and operator of high-performance data centers in China. The first phase of this parcel will commence service next year.
Wessex Water will see a tariff hike of c.9% on average from 1 Apr 2023, which should be sufficient to offset the rising operating cost. We believe the overall impact on earnings is neutral, if not better
The research house continues to like the stock and maintains its positive view on the group.
